Question

Mechem Corporation produces and sells a single product. In April, the company sold 1,900 units. Its total sales were $152,000, its total variable expenses were $79,800, and its total fixed expenses were $56,700.

Required:

a. Construct the company's contribution format income statement for April. (Do not round intermediate calculations.)
b. Redo the company's contribution format income statement assuming that the company sells 1,800 units.

Answer 1

1. $15,500

2. $11,700

Step-by-step explanation:

Given the following information,

the company sold 1,900 units

Total sales were $152,000

Total variable expenses were $79,800

Total fixed expenses were $56,700

The structure for Contribution income margin format is seen below;

Income statement:

Sales

- Total Variable cost

= Contribution margin

- Fixed costs

= Net Operating income

1. Income statement

Sales = $152,000

Less Total variable cost = ($79,800)

Contribution margin = $72,200

Less Total Fixed costs = ($56,700)

Net operating income = $15,500

2. Here, we need to calculate the unitary selling price and the unitary variable cost

Selling price = $152,000 ÷ 1,900 units = $80

Unitary Variable cost = $79,800 ÷ 1,900 units = $42

Therefore,

Sales = 1,800 units × $80

$144,000

Less total variable cost = 1,800 units × $42

$75,600

Contribution margin

$68,400

Less total fixed costs

$56,700

Net operating income

$11,700